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Ending it all

In the recent case of Geys v. Société Générale, Mr. Geys, who was employed as managing director was given a letter in November 2007 by Société Générale stating: “I am writing to notify you that Société Générale, London has decided to terminate your employment with immediate effect”. Mr. Geys was then escorted from the building and never returned to it. Despite this, the Supreme Court has ruled that his contract of employment was not terminated.

The Supreme Court found that Mr. Geys remained an employee of Société Générale until he had received “clear and unambiguous” notice that his employer was exercising its right to terminate his employment by making a payment in lieu of notice in accordance with his contract of employment. The purported termination of Mr. Geys’ employment which was not done in accordance with his contract of employment constituted a repudiatory breach of contract and as a result it was up to Mr. Geys to accept the repudiatory breach (and termination) or affirm the contract (i.e. not accept the termination). Mr. Geys initially reserved his rights and then informed his employer that he was affirming the contract. The Court held that the contract continued until Mr. Geys received a letter from Société Générale some six weeks later, informing him that they had exercised their contractual right to terminate the contract and pay him in lieu of notice. The fact he had received the payment in lieu of notice into his bank account a few weeks prior to this notification was also not a valid termination.

The period of time between the initial purported termination of Mr. Geys’ employment and the actual effective termination (approximately six weeks) was of particular financial importance as the date of termination affected the calculation of Mr. Geys’ termination payment. The later date meant that Mr. Geys was entitled to a significantly more substantial pay out (millions of Euros) than he would have received had the termination been effective at the earlier date.

What we must take from this is that it is critical for employers to terminate the contract of employment in accordance with the strict requirements of that contract—which is what the employer failed to do in this case. The original letter purporting to terminate his employment may have been enough from a statutory perspective to end his employment for unfair dismissal purposes (although the Supreme Court did not consider that point) but because it was not a termination in accordance with the contract, it was merely a repudiatory breach of contract (which Mr. Geys cleverly elected not to accept) and did not terminate it. In this case, the termination was recorded in writing (but just not correctly worded) but on a related note, it is relatively common for termination verbally, overlooking the fact that the contract requires written notice—following this case that would not serve to validly terminate the contract, if the employee raised the point.

The damages in Mr. Geys’ case related to the calculation date for his termination payment but in other cases they could equally apply to bonuses or stock options which would continue to vest if notice had not been properly served. Either way, these are costly cases to get wrong.

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